Discussion of: "Acquisition profitability and timely loss recognition" by J. Francis and X. Martin

Sugata Roychowdhury*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

37 Scopus citations


Francis and Martin (2009) test whether accounting conservatism induces managers to make better acquisition decisions. This discussion highlights three main issues. First, the hypothesized links between conservatism and future investments are potentially incomplete. In particular, the possibility that conservatism can have dysfunctional outcomes if acquisition decisions are based on anticipated earnings effects is ignored. Second, the evidence is insufficient to infer a causal relation between conservatism and acquisition profitability. Third, the hypothesis development fails to indicate whether timely loss recognition or the asymmetric timeliness of loss versus gain recognition is the more appropriate measure of conservatism given the context.

Original languageEnglish (US)
Pages (from-to)179-183
Number of pages5
JournalJournal of Accounting and Economics
Issue number1-2
StatePublished - Feb 2010
Externally publishedYes


  • Acquisition
  • Announcement returns
  • Conservatism
  • FASB
  • SEC

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Discussion of: "Acquisition profitability and timely loss recognition" by J. Francis and X. Martin'. Together they form a unique fingerprint.

Cite this